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Law360 quotes Jessica Feil on the Top 5 Esports Legal Issues to Watch

Zachary Zagger & Matthew Perlman

Law360

July 28, 2017

Law360, New York (July 20, 2017, 4:59 PM EDT) — The industry for competitive video game playing, or esports, is moving into the mainstream, but there are still several moving parts to its development that should keep attorneys on their toes.

Sixteen teams competed in February for a prize pool of $450,000 playing “Counter Strike: Global Offensive” at the Dreamhack Masters tournament at the MGM Grand Garden Arena in Las Vegas. (AP)

Esports is exploding in popularity in recent years, particularly among younger generations. But with this growth, game publishers and league organizers are trying to stabilize their competitions while issues remain for the players, who can now call playing video games a profession.

“The biggest issue with esports is what do we do with it next?” said esports industry attorney Ian Roven, himself a former video game competitor. “Right now it is a sort of state of flux.”

As esports continues to develop, here are five of the key issues it will face.

League Franchise Stability

Already this year two major game developers, Blizzard Entertainment Inc. and Riot Games Inc., announced they would adopt a franchise model and make other changes to the main competitions around their respective games “Overwatch” and “League of Legends,” making those competitions resemble traditional sports leagues.

These moves were not surprising “mainly because it is going to provide a form of stability which the team owners, in particular, are really craving,” said esports and entertainment attorney Roger R. Quiles.

Blizzard, a subsidiary of Activision Blizzard Inc., said earlier this month that its new league will feature live competitions for “Overwatch,” a multiplayer first-person shooter game, with teams in various cities in the U.S. and Asia. The teams will be able to generate revenue through advertising, ticketing and broadcast rights for the events and will receive an equal share of all league-wide net revenues, Activision said.

But it is not just the team owners. Other investors want to see where a given league is headed and want to know which teams are going to be there down the road, esports industry attorneys said.

“This will give them a chance to see a clearer path versus the situation that we are dealing with with many different associations or with different leagues that are always changing, especially with team makeups changing so dramatically from season to season,” said Jessica Feil of Ifrah Law, whose practice includes esports.

Player Labor Movement

As the leagues become more stable and competitions offer bigger prizes, the players themselves are becoming more sophisticated, seeing esports as a business and competing as a career rather than just making some money to play video games.

“I still think most gamers didn’t really know about it until this year when they started seeing the prize pools,” Roven said.

Already, esports tournaments are offering prize pools as large as $10 million to $20 million, and the top 31 money-winning athletes have pulled in over $1 million, according to E-Sports Earnings.

In Riot’s announced move to a franchise model for its North American League of Legends Championship Series, the company surprisingly also said it supported the development of an independent players association and would institute a $75,000 minimum yearly salary and guarantee players 35 percent of league revenue.

“I think it is a good thing for players, and I think it is a good thing for fans and investors to have a team that they can behind and not have the players always up in the air,” Feil said.

But attorneys said a players association or union may still be a ways away. For now, Quiles, who represents players and coaches, says he’s seen more of them seeking representation to negotiate better playing contracts.

“They have heard the horror stories of other players being entirely screwed over, and they want to make sure that doesn’t happen to them because they see this now as a legitimate career,” he said.

NCAA Amateurism Concerns

As professional leagues and competitions continue to grow, some colleges have started sponsoring esports teams and offering scholarships for players. It is providing another avenue for esports players to develop, but there is some concern it could run into issues with the National Collegiate Athletic Association, particularly its amateurism rules that limit athlete compensation to scholarship and aid packages covering the cost of attendance.

For now, the NCAA does not govern college esports, but if it does get involved, it could bar college esports players from competing in tournaments for cash prizes, whether competing for the school team or otherwise, or from being able to profit off their video game online streams, things they are ostensibly able to do now.

“If you have an NCAA collegiate player, then would that collegiate player be prohibited from making money off of his stream because then he would be using his name and likeness to as a means of generating money and that is entirely against the NCAA’s disciplinary code?” Quiles said. “There is definitely going to be some friction there if and when that does happen.”

Traditional college athletes challenging these rules in an ongoing antitrust class action had sought to obtain more information from the Pac-12 Conference on intercollegiate esports competitions to attack the NCAA’s reasons for not restricting the pay of traditional college athletes.

Impact of Sports Betting

Many are already betting on esports competitions either overseas or with sports books in Nevada or perhaps through quasi-legal means, some of which involve wagering online currencies.

Nevada regulators have said betting on esports is legal in the state, and this year state lawmakers further allowed it on a pari-mutuel basis.

However, outside Nevada the legality of esports betting is not clear. Federal law prohibits most states other than Nevada from legalizing wagering on sports games, but last month the U.S. Supreme Courtdecided to hear a case challenging the federal restriction, which could open the door to legalized sports betting and could mean the esports industry must adjust to handle it.

“if we are finally talking about sports betting coming to the us outside of Nevada, that is going to be huge for esports,” Feil said. “People do want to wager on these games, so giving them a legal, structured, regulated, safe environment to do that is important, but esports industry is going to have to meet that call and show that it can provide clean sports with integrity.”

Continued Investment From Traditional Sports

Professional sports leagues and its team owners have already begun to invest in esports. In Blizzard’s new seven-team “Overwatch” league, New England Patriots owner Robert Kraft and Jeff Wilpon, son of the New York Mets’ principal owner, are part of the original group of team owners.

While investment from sources not connected with traditional sports is expected to continue, these sorts of investments from traditional leagues or teams is expected to further drive esports’ growth.

“It makes sense for traditional sports teams to get involved because the comparative costs are much lower and you could potentially encompass a much larger market and hope to leverage those synergies,” Quiles said.

The NBA has even launched its own esports league based on the NBA 2K games series with teams associated with its actual basketball teams. While differing from other esports, it is definitely a toe in the water for the traditional leagues.

“I look at it as Disney buying Star Wars,” Roven said. “People said ‘Leave Star Wars the way it is’ and asked ‘Why they spent so much money on it?’ Then you see they build ‘Star Wars land’ and are taking it to the next level. … You see how it is generating more interest.”